Reforming the investment treaty regime

A ‘backward-looking’ approach
Chatham House briefing ISBN: 978 1 78413 460 0
Members of the European Parliament hold panels reading ‘Stop ISDS’ at the European Parliament in Strasbourg

Lauge N. Skovgaard Poulsen

Associate Professor and Director of Graduate Studies, School of Public Policy, University College London

Geoffrey Gertz

Fellow, Global Economy and Development Program, Brookings Institution

This paper, which is published under the Global Economy and Finance Programme’s ‘Rebuilding International Economic Cooperation’ project, proposes a practical and flexible option for reform of investor–state dispute settlement (ISDS) in investment treaties. ISDS, which allows foreign investors to sue sovereign governments through international arbitration, has become increasingly controversial.

Although reform efforts have intensified in recent years, governments have focused primarily on constraining ISDS in future investment treaties. This is misguided. The most important reform effort lies not with future agreements but with the 3,000 already in place.

A better solution would be to use plurilateral ‘interpretative statements’, allowing states to clarify and define their positions on contentious clauses in existing treaties. The UN Commission on International Trade Law (UNCITRAL) could be tasked with prioritizing such an initiative as part of broader reform discussions. Alternatively, the new US administration could lead the process through the OECD, possibly with the UK.